Saving for a down payment can feel like a lot of work but it doesn’t have to be. You just need to know where to focus your dollars for the quickest results. These simple pieces of advice will help you save for your down payment with ease.
Pay Off Any Debt
Having little to no debt shows a lender that you're serious about purchasing a home. It will also make it more likely for you to be able to explore lender options because it makes you a perfect candidate. So, make sure to pay down any credit cards before you apply for a mortgage. This will also make saving much easier because you won’t have to worry about plotting money to pay off debt.
Make A Budget
You may have promised yourself you'd cut back, but it's easy to forget about budgeting your spending over time. If you have a written budget you consistently refer to, it can act as a reminder. Also, it will visually show you your savings so you can see your dedication paying off.
There are some great apps to help you create a personal budget. You can track how much each of you is spending and saving, and gradually get closer to meeting your down payment goal.
Borrow From Your RRSP
The Home Buyers Plan is ideal for new home buyers. If you haven’t owned a home in the last five years, you can withdraw money from your RRSP to pay your down payment. Technically, you're borrowing the money from yourself, as it has to be paid back within the next 15 years. You can withdraw up to $25,000 tax-free per person to put towards a down payment.
Use a Tax-Free Savings Account
Putting your money away in an account where it won't be touched is the best way to save. For your down payment, using a Tax-Free Savings Account (TFSA) is a smart way to do this. Having a TFSA is favourable for new home buyers because you can withdraw and deposit into the account without being taxed. A TFSA is nice because it offers the flexibility to withdraw without repaying a loan.
Know Your Priorities
Think of all the little areas you could save money on that you haven’t considered in the past. Small changes like where you shop for groceries, not buying coffee, or packing instead of purchasing lunch can make a huge difference. It may not seem like much on a day-to-day basis, but those little things can make for some huge savings in the long run.
Take Public Transit
Owning a vehicle is an added expense that can put quite a dent into a savings plan. The average vehicle within a year costs approximately $9,000 to maintain, gas up, and insure. While you may not want to get rid of your vehicle entirely, you can save money by commuting via public transit. If you have more than one vehicle in your household consider selling one and sharing the other. Although this can be a transition, it will show in your down payment savings.
New Ways to Save
On pay day, make sure you pay yourself first and put away 15% for your down payment goal. When this is done, you won’t notice much of a difference off the top of your cheque, but in the long run, it can save you an exceptional amount. Getting in the habit of doing this is easy and won’t take a huge amount of effort on your part.
Another trick can be used when you buy something on sale or at a discounted price – put away the amount you saved into your savings account or TSFA. This can add up over time and you'll be glad you put in the extra effort!
With these ideas in mind, saving for a down payment will be much easier. Try some out and track how much you save. It will be gratifying to see how much you can save for a down payment. This simple advice will bring you one step closer to the home you deserve!
As you navigate this process, you may also want to meet with a lender to help you crunch some numbers to find out if you qualify for a mortgage and how much you need to save for a down payment.